Manufacturing & Supply Chain

AIB Ireland Manufacturing PMI® data indicated a deeper deterioration in operating conditions across the Irish manufacturing sector in June. The downturn was the most severe in nearly a year as underlying demand trends continued to worsen and thereby resulted in sharper contractions in new factory orders and production. Moreover, while growth in employment was reported in June, the rate of job creation lost pace since May to signal only a fractional uptick in staffing levels. Inflationary pressures meanwhile picked up.

Commenting on the survey results, David McNamara, AIB Chief Economist, said: “The June AIB Irish Manufacturing PMI shows the sharpest decline in activity in the sector in 11 months, with the headline index falling to 47.4 in June from 49.8 in May. The downturn was driven by a contraction in output and new orders, alongside a continued decline backlogs of work. The Irish manufacturing PMI remains above the flash June reading for the Eurozone at 45.6 but far below the US and UK at 51.7 and 51.4, respectively.

“The Output Index has now been below the 50 mark for four months running, with the fall in factory production the fastest recorded since July 2023. Respondents in June attributed the fall to reduced client activity. New orders fell at the second fastest pace in 18 months. Firms linked this drop to the current economic climate, which has impacted both domestic and foreign demand. This has also been reflected in new export orders coming in below 50 for the fifth successive month as foreign demand remained subdued.

“Stocks of both inputs and finished goods fell yet again in June due to the declining levels of new orders. Purchasing activity also fell at a faster rate than the month prior. Delivery times shortened; however, some respondents cited that this was largely due to a fall in purchasing activity.

“Employment broadly stalled in June, but still remained just above the key 50 mark. There were mixed responses from firms, with some reporting new recruitment, while others struggled to retain workers amidst lower production levels and the continued pattern of falling backlogs of work.

“Price pressures increased in June. Input price inflation accelerated again but still remains below the historic average. Output price inflation also accelerated compared to last month, as firms attempted to pass on higher input costs, largely related to increased labour costs.

“Despite the downturn in activity and though historically subdued, Irish manufacturers maintained a positive outlook regarding output over the coming year. Positive expectations stemmed from hopes of further rate cuts over the next year, as well as a recovery in client demand.”